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Sales tax extension considered as part of flood control financing

FARGO — With a goal of starting construction on the proposed 36-mile flood channel next spring, Fargo-Moorhead Diversion leaders are considering a complex financing mechanism that may require voters’ approval to extend half-cent sales taxes in Fargo and Cass County.

One of several financing options to cover the estimated $450 million local share of the $1.8 billion project calls for a special assessment across Cass County, which diversion officials said likely would never be collected. Instead, it would be used as a sort of collateral to get better interest rates on a loan, which would then be repaid with local sales taxes.

Fargo and Cass County passed half-cent sales taxes to fund permanent flood relief in 2009 and 2010, respectively. Fargo voters also approved in 2012 a 20-year extension of a half-cent tax for infrastructure, part of which can be used for flood control.

But the question is how to pay off a 30-year bond with 20 years of sales tax revenues. That’s where a possible sales tax extension in both Fargo and Cass County would come in.

“A special assessment-backed bond issue that uses sales tax to make the annual payments could be a real money-saving way to finance the project,” Mark Brodshaug, chairman of the Cass County Joint Water Resources District, said as he outlined the special assessment plan during a Diversion Authority meeting Thursday.

As local officials turn their attention to beginning construction, they need money in the short term — not stretched out over the next two decades.

“There’s a timing issue,” said Brodshaug, who has spent more than a year figuring out how a special assessment might work. “The money that the sales tax collects isn’t going to help build something next year.”

Though Diversion Authority Chairman Darrell Vanyo said they’re “fairly optimistic” about the odds of starting construction on the footprint of the project this time next year, he stressed there is still plenty in motion that could slow — or accelerate — that goal.

The project is still awaiting final authorization from Congress. Though both the House and Senate have approved the project, the two chambers need to iron out differences between their bills.

Vanyo also said they promised North Dakota’s Legislature, which is putting up another $450 million, not to start digging until the project is authorized and has received startup construction funds from the federal government. The state’s share of the cost is contingent upon the project receiving federal dollars for construction.

The proposed special assessment district divides the county into different “benefit regions” based on how much property owners would benefit from the diversion. Property taxes would be levied through several variables, including property value and the benefit score in the region.

That same scheme would come in handy to cover the estimated $3 million or more in annual maintenance fees for the diversion.

The special assessment plan is one of just several options to shore up funding for construction. The Diversion Authority is also considering short-term lending from local banks or a loan from the Bank of North Dakota, among other options.

Kyle Potter is an enterprise reporter at the Forum. He came to Fargo-Moorhead in May 2013 after stints at the Associated Press, the Las Vegas Review-Journal, the St. Paul Pioneer Press and the Minnesota Daily.